The US Federal Reserve has voted to hold interest rates as its chair, Jerome Powell, defended the importance of central bank independence.
The Fed said it will keep its key lending rate between 3.5% to 3.75%, stating that economic activity in the US “has been expanding at a solid pace”.
US President, Donald Trump, has frequently criticised Powell for not cutting rates quickly enough. Federal prosecutors recently opened a criminal investigation over testimony Powell gave to the Senate about renovations to Fed buildings.
On Wednesday, Powell declined to comment on the probe but he said that if a central bank lost its independence “it would be hard to restore the credibility of the institution”.
Powell previously said he believed the federal investigation stemmed from Trump’s anger at the pace of interest rate cuts.
On Wednesday, at his first press conference since condemning the Department of Justice (DoJ) probe, he stressed the importance of central bank independence to ensure monetary policy is not leveraged for political gain.
“It’s just an institutional arrangement that has served the people well – to not have direct elected official control over the setting of monetary policy,” he said.
“If you lose that, it first of all would be hard to restore the credibility of the institution,” Powell said, adding that he is “strongly committed” to retaining the Fed’s independence.
Trump is soon expected to announce a replacement for Powell who steps down as chair in May.
Former heads of the US central bank also strongly criticised the DoJ investigation, describing it as a bid to undermine the Fed’s autonomy.
Commenting on the decision to keep rates on hold, Powell said: “The economy has once again surprised us with its strength.”